Equities Markets Turning Higher as USD Comes Under Further Pressure

The key theme to note into the end of the week is the improvement we’ve seen in risk appetite. Stock and commodity prices have rebounded firmly across the week, largely linked to the fall back we’ve seen in the US Dollar, as traders brace for a slower pace of hikes from the December FOMC onwards. A dovish set of FOMC minutes midweek helped seal the Dollar’s fate. There are still risk factors to monitor in the coming weeks, however. The biggest one will be the November CPI reading which is due ahead of the December FOMC. If any surprise upside is seen, the Fed might still opt for a larger hike which would upset the current narrative.

Key Factors for Today

- USD remains weak following Wednesday’s dovish FOMC minutes
- Equities bouncing back, for the most part, as USD declines – some uncertainty ahead of Black Friday weekend
- Risk currencies lead in FX – GBP bounce back continues
- Metals stabilise on USD declines – Oil remains weak on China lockdown / G7 price
cap concerns

Coming Up

- EUR – ECB Meeting Minutes
- NZD – NZ Retail sales
- GBP – BOE’s Mann speaks

Equities Helped by Fresh USD Selling

Equities prices are ending the week higher across the board. In Europe, the DAX broke out to fresh 5-month highs this week after unexpected strength in the German Ifo business survey. US stocks have been buoyed by a weaker US Dollar. However, there are concerns as the Black Friday weekend gets underway with many retailers warning of lower than usual sales, given the cost-of-living crisis. This seems to echo the view we heard from many retailers across earnings season warning of smaller-than-usual Q4/holiday season earnings.

Credit Suisse Shares Hit Fresh Lows

Shares in struggling French bank Credit Suisse hit a fresh all-time low of $3.56 on Thursday as pressures build once again. The bank issued 889 million new shares to existing investors marked at $2.52 in a bid to raise capital with fears mounting on the back of the bank forecasting a $1.6 billion Q4 loss due to client withdrawals and litigation costs

Risk Currencies Lead in FX

In FX, the softer tone to USD trading across the week has allowed other currencies within the G10 to return to strength. Risk currencies in particular have performed well and of these NZD has seen the best gains this week. NZD was bolstered by a hawkish RBNZ meeting on Wednesday which saw the bank hike rates and signal further hikes to come, creating some divergence between itself and central banks such as the RBA and BOC which both recently pivoted on rates.

GBP Bouncing Back

GBP has performed well this week also. Despite the OECD warning that the UK faces a recession the rest of the G7 will avoid. A more stable political backdrop and a more credible Autumn budget have helped assuage investor fears to some extent.

Metals Stabilise, Oil Still Weak

In the metals and commodities space, both gold and silver have stabilised this week following the fresh weakness we’ve seen in USD. Both metals are sitting off last week’s highs for now though, if USD falls lower in coming weeks, there is plenty of room for both metals to advance here. Crude oil prices are clinging to the lows today following heavy selling again yesterday. Concerns over fresh lockdowns in China as well as a potential G7 price cap on Russian energy are both weighing on the near-term outlook for crude prices making a further break lower a real threat next week.